Like most of Europe, the UK is coming out of recession. Given the largesse of the financial stimulus that was provided and the poor state of the public finances going in to what was a deep recession, the UK has been left with a larger deficit than most European countries. Fortunately, our overall debt started from a healthy low.
Unfortunately, there is uncertainty over the ability of the UK to take the action necessary to bring the deficit under control (by reducing expenditure, raising taxes, or both), unlike our Irish neighbours who have commendably got on with taking their medicine. We are in the middle of a General Election and the markets accept that no action will be taken in the UK until after the election.
Whoever wins will be expected to very quickly set out a credible plan to bring the deficit under control, or else the markets will take out their worries by pushing up the UKs borrowing costs and driving down £UK sterling. This could push us back in to recession. The worry is that polls for the election indicate an indecisive result with no one party being able to form a stable government able to take firm action.
A close election may be exciting and interesting for the media pundits, but it brings to mind the Chinese curse: May you live in interesting times. I, for one, am hoping for a boringly decisive outcome.